One in ten charities hit hard by cuts face closure

ALMOST ten per cent of major charities face closure amid a triple whammy of public sector cuts, loss of donations and soaring levels of need.

The grim picture is revealed in a study of 750 large UK charities highlighting how the Westminster government’s austerity measures and the recession are impacting on their finances.

The think-tank report also advises that the future “may be bleaker” for smaller charities.

Alex Cole-Hamilton, head of policy at Aberlour, the largest Scotland-only children’s charity, said: “We are seeing donations from wealthy individuals dry up while local authority funding is getting tighter as they increasingly put services out to tender.

“Aberlour has made staff redundant and introduced new ways of working to try to become more competitive and more attractive to commissioners. It’s a tough situation but the most important is that we continue to provide services to vulnerable young people, because they are the reason we are here.”

Around one-fifth of the charities that took part in the study by New Philanthropy Central operate north of the Border.

It examined the impact of cuts and also changes to methods of funding, which are forcing more charities to bid for contracts or enter consortiums to win public work and more use of “payment by results”.

It found that nine per cent said they had already closed or were threatened with closure due to spending cuts. More than 65 per cent said they were expecting to close frontline services and 62 per cent had eaten into their reserves. It is feared that smaller charities, not covered by the research, may be faring even worse.

The report states: “We need to know more about how small organisations and charities that are struggling to win contracts are managing. We suspect the picture may be bleaker than the one painted here.”

Last year, Scottish charities warned they could lose up to £200 million in public funding from Holyrood over the next four years as a result of the Westminster government’s cuts.

The Scottish Council for Voluntary Organisations has also revealed income for Scottish charities fell by £96m in 2010, in large part due to public spending cuts.

The report warns large charities need to adapt to a new funding environment, but those commissioning services need to realise simply inviting charities to bid for contracts will not result in a level playing field.

John Downie, director of public affairs for the Scottish Council for Voluntary Organisations and a member of the Holyrood’s working group on sustainable procurement, said: “Many of the trends to have emerged in NPC’s survey also apply to Scotland. Payment by results could deter charities from taking on contracts despite them being the best placed to deliver them.”